June 28, 2000
The Administration strongly opposes House passage of H.R. 4680 because its private insurance benefit does not meet the President's test of being a meaningful Medicare prescription drug benefit that is affordable and accessible for all beneficiaries. H.R. 4680 builds on an unstable and unreliable Medigap market, an approach which the insurance industry itself has concluded is unworkable. If H.R. 4680 were presented to the President, he would veto it.
The President has made passing a voluntary Medicare prescription drug benefit one of his highest priorities. His principles for a drug benefit are that it be voluntary; be accessible to all beneficiaries; be meaningful; give eligible seniors and people with disabilities bargaining power to reduce drug prices; assure access to medically necessary drugs; and be affordable to beneficiaries and the Medicare program.
The President's plan would ensure that Medicare pays half of all participants' prescription drug costs up to $5,000 when fully phased in and that no eligible senior or person with a disability pays more than $4,000 out-of-pocket. In addition, seniors would benefit from price discounts negotiated by private pharmacy benefit managers. Beneficiaries would have a choice of getting coverage through traditional Medicare, managed care, or retiree plans. Those who voluntarily opted for the new benefit would pay a monthly premium of $25 in the first year, and low-income seniors would pay no or lower premiums and cost sharing. This coverage would start in 2002 and is part of the President's overall plan to strengthen and modernize Medicare.
The Democratic substitute, which the President strongly supports, also provides an affordable, meaningful Medicare drug benefit. It, too, covers half of costs up to $5,000 when fully phased in, includes a stop-loss of $4,000, and ensures that seniors have a choice of coverage through Medicare fee-for-service, managed care or retiree coverage. The President is dismayed that the Republican leadership refused to allow a vote on a true Medicare benefit that provides the resources necessary to ensure that premiums are affordable.
H.R. 4680 does not meet the President's principles for a meaningful prescription drug benefit. Specifically:
The Administration also objects to creating a new bureaucracy to administer the new drug benefit and Medicare+Choice. This is inconsistent with the President's principles of efficient administration of the drug benefit. The Administration believes that the prescription drug benefit should be integrated into the Medicare program like all other Medicare benefits. In addition, provisions in H.R. 4680 related to the Medicare Advisory Board and its reporting requirements raise constitutional concerns.
H.R. 4680 would affect direct spending; therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. OMB's estimate of the pay-as-you-go cost of this legislation is under development. The Congressional Budget Office estimates that H.R. 4680 will increase direct spending by a total of $39.7 billion over five years.